A reader recently expressed that she felt there were no "rules" in the arena of entertaining multiple offers in a real estate transaction. What I have found in many instances, is that what is legal and acceptable practice isn't what many buyers want to hear.
"You should have told me you had multiple offers … that's not fair," is usually the first complaint filed from the party who loses out on a contract. Then they go looking for someone to file a complaint against or to sue. (We are, unfortunately, the most litigious country on the globe.)
On the other hand, I've heard some buyers complain that they believe the listing agent is lying and only trying to push up their offer when they are told there are multiple offers -- then they demand to see the other offer. They assume that the seller is simply trying to push up the price by claiming there are other offers when none actually exist.
Revealing the status of multiple offers is up to the seller. The cold hard facts are that the buyer has to sit and wait for a response from the seller (depending on whether or not he wrote in a deadline for responding). Nevertheless, the buyer has no "rights" to know if there are more offers.
The National Association of Realtors' Code of Ethics has several Standards of Practice (SOP) in dealing with multiple offers. First of all -- a Realtor "shall submit offers and counter-offers objectively and as quickly as possible."
In fact, all offers must be submitted until the seller has made a final decision. "When acting as listing brokers, REALTORS shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. REALTORS shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord..."
As far as telling buyers about multiple offers, this situation apparently became so prevalent that about a year ago the NAR instituted the following instructions in its SOP: "REALTORS, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, divulge the existence of offers on the property."
The key wording in this phrase is "in response to inquiries." It's a kind of "don't ask, don't tell" situation for the listing agent. She's not going to tell the buyer about multiple offers if the buyer doesn't ask -- however, reading the SOP further, you can see that the Realtor is not obligated to divulge the presence of multiple offers, either, without the sellers' approval.
In a seller's market, some agents will place a deadline on when all offers must be submitted. Once the offers are submitted, the agent then settles down with the seller for a marathon contract review. The real area of contention comes when offers float in one after the other over a few days. Thus, the usual practice of dealing with multiple offers would go something like this:
Each offer is presented to the seller for consideration.
The seller will hear all offers before making a decision.
A seller can accept or begin countering more than one offer at a time, however, s/he must set an order of precedence, i.e., primary offer, first backup contract, second backup contract, etc.
Be sure to get released from an offer before finalizing the selected offer, i.e., don't sell the house twice.
Multiple offers can be a good thing. In a fast-paced market, they are considered the norm and the presence of such inflates pricing. The buyer who works with an agent who understands the aggressive techniques needed to escalate their offer, will win. However, you can also have buyers pull contracts during multiple offer situations because they want to deal in a less competitive environment.
It's interesting to hear from buyers who are outbid in the selling process and start talking about "fairness" in a bidding war. There's this idea that just like kids lining up for a drink at the lemonade stand, that if they get there first, they get to drink the freshly made beverage at the price posted without any interference from the kid in the back of the line.
In real estate, the seller doesn't care when you got there -- he or she is looking at basically one thing -- what's the net dollar amount to the seller.